TDS on Property: Section 194IA Guide

Have you purchased any property in the near past or are you planning to purchase it? If answer is yes, then you should be aware of provisions of TDS on property.

Many persons are purchasing property and not deducting TDS thereon. Later they are receiving demand from Income tax department. There are some cases in which they are deducting TDS but not depositing it. I have tried to explain in details the provisions of section 194AI so that you can yourself pay the TDS on time.

Section 194AI of income tax 1961, deals with provisions of TDS on property. According to this section it is mandatory for every person purchasing an immovable property of value Rs. 50 Lac or more to deduct TDS @ 1%.

When to Deduct TDS on Property?

When you credit the sum to the account of seller or when you actually pay him, whichever is earlier.

Crediting the sum to the account of seller means when you become liable to pay to him you credit his account in your books. You become liable to pay only when property is registered in your name.

If you have paid any advance, then you need to deduct TDS on advance amount.

For example, you purchased a property of Value Rs. 55 Lac on 25th Sept 2015 (registered in your name). But earlier you have paid Rs. 25 lac as advance and rest amount Rs. 30 lac you paid on 25th Sept 2016.

You paid advance of Rs. 10 lac on 6th April 2016, Rs. 5 lac on 9th June 2016, Rs. 10 lac on 8th July 2016.

So in above situation you need to deduct TDS@ 1%, each time when you paid advance and rest 1% on Rs. 30 lac on 25th Sept 2016. The TDS deducted will be as follows:

Date

Amount Paid ( Rs.)

TDS @ 1% (Rs.)

6th April 2016

10 Lac

10,000

9th June 2016

5 Lac

5,000

8th July 2016

10 Lac

10,000

25th Sept 2016

30 Lac

30,000

So you should have deducted TDS of Rs. 55,000/- as above from the payment made to seller. The seller will receive only Rs. 54,45,000/-

Who are exempted from deducting TDS on Property?

The following persons need not to deduct TDS on Property.

If the property purchased is movable property like car, furniture etc.

If the immovable property purchased is less than Rs. 50 Lac.

If the immovable property purchased is from Non-resident.

How to pay the TDS deducted to the Government?

The TDS deducted must be submitted to the Government in form No. 26QB.

Form 26QB is submitted online. The steps to fill the Form 26QB are as follows:

Open the Online form 26QB by this link.

Fill your details like your name, PAN etc.

Likewise, fill the details of Seller.

Fill the details of property, date of purchase/payment, amount of purchase.

Calculate the TDS @ 1%

Fill your bank details and pay the amount.

A challan will get generated, save it.

When to Pay TDS or When to File form 26QB?

TDS is paid through Form 26QB as explained above. You need to file form 26QB every time when you pay TDS. The TDS are paid on or before 7th day of following month except in case of march month it is deducted on or before 30th April.

In the above example, as you paid first advance on 6th April 2016, so you need to pay TDS by 7th of May 2016. The date of payment of above example is shown below:

Date

Amount Paid (Rs.)

TDS @ 1% (Rs.)

Due Date of Payment of TDS

6th April 2016

10 Lac

10,000

7th may 2016

9th June 2016

5 Lac

5,000

7th July 2016

8th July 2016

10 Lac

10,000

7th Aug 2016

25th Sept 2016

30 Lac

30,000

7th Oct 2016

So for each installment you need to pay TDS on due dates.

NOTE : FROM 1ST JUNE 2016 ONWARD THE DUE DATE HAS BEEN EXTENDED FROM 7 DAYS TO 30 DAYS. IT IS ONLY APPLICABLE FROM 1ST JUNE ONWARD TRANSACTIONS. ( Rule 30(2A) amended by Income-tax (11th Amendment) Rules, 2016.) ( Notification 30/2016)

Actually you are deducting Tax on seller’s income and paying it in advance to the government. Later the seller can claim that TDS has been already deducted from his income. For this you need to provide him proof of TDS deducted.

You will have to provide him Form 16B as proof of TDS deducted.

How to download Form 16B?

Steps for downloading Form 16B are listed below:

Go to Traces website, click on register as new user, then Register as Taxpayer.

After filling your personal details, you can choose one of the three options to register. Remember you need to register in TRACES after filing the Form 26QB.

Once you are logged in, you need to click on Downloads tab, then click on “Form 16B (for buyer)”

Request for Form 16B by filling the PAN of Seller.

Your download request will be available in requested download under Download Tab.

How to deal with demand Notice received for TDS payment on Property?

Sometime due to lack of knowledge of TDS provisions we fail to deduct TDS on property and then we receive the notice form income department for payment of TDS. You should not panic in such case.

In such case you can calculate whether the demand amount is correct or not. You can apply above TDS & interest provisions for calculation of Demand. If you are satisfied with the demand, then pay the demand through the online tds payment website and select “Demand Payment” option.

For detailed steps on demand payment for TDS on property read this file.

If you find that the demand is unjustified then you can contact the person mentioned in the demand notice.

Hey readers, welcome to my blog investsaver.com. I am Chartered Accountant by Profession and I love to write on tax & money matters. You may ask your queries through comments related to the topic, I will be happy to answer them.

We paid 5710000 so far in installments from Oct 2015 till date. All the payments so far made from my grand mother’s account.

Out of the total cost of property the remaining amount which is payable through home loan and I will be paying EMI for the same.

Questions on TDS:

I m aware that TDS needs to be deducted and deposited with govt for each installment/payment made to the builder. The TDS should be deposited by end of next month for the month you have paid the installment. In my case I can deposit till the end of Nov 2016. (Note that they have recently extended the time frame for depositing TDS as per few news publications – however please confirm and let me know)

1. Would that be file if we pay TDS at the end of this month for the whole installments which we paid in the month of Oct and Nov 2016 or should I paid as per the individual installments?

2.Since there are 2 buyers and so far all the payments done through my grand mother’s account so would that be fine if we shows her name under payees column and when my loan will get disbursed and when I actually need to pay another part of TDS at that time I will show my name in the payees column? Would that be fine? I know all the owners and co owners must pay TDS proportionately. So this condition is also getting satisfied.

Hi Parhamesh,
The point wise answer to your queries are as follows:
1) TDS need to be paid on each installment getting due or paid by you. The due date is 30th of following month, which is changed from 1st june. Read in above aticle. I would suggest you to pay on each installment.
2) You can show her name in payee or your name. no issues. but at the end TDS must have been proportional paid according to ownership ratio.